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Monday, November 14, 2011

When Bank of America announced they were dropping plans to institute a $5 monthly debit card fee, that was a win for consumers. The fee was an end run around new banking regulations that limited the amount banks could charge merchants for processing debit card purchases. In other words, the banks took a "stop screwing people" law and applied it as a "screw different people" law. It didn't go over real well.

The move was a PR disaster and other banks that had been planning similar fees backed off as well. For now, the debit card fee is all but dead. But that doesn't mean that a "stop screwing people" law has to be taken as a "stop screwing people" law. Meet the stealth screw.

Even as Bank of America and other major lenders back away from charging customers to use their debit cards, many banks have been quietly imposing other new fees.

...Facing a reaction from an angry public and heightened scrutiny from regulators, banks are turning to all sorts of fees that fly under the radar. Everything, it seems, has a price.

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"Banks tried the in-your-face fee with debit cards, and consumers said enough," said Alex Matjanec, a co-founder of MyBankTracker.com. "What most people don't realize is that they have been adding new charges or taking fees that have always existed and increased them, or are making them harder to avoid."

Lose your debit card? That'll be $5-$20. Fifteen bucks to have money wired to your account. Fifty cents for every deposit made from a mobile phone. "Banks can still earn a profit on most checking accounts," NYT reports. "But they are under intense pressure to make up an estimated $12 billion a year of income that vanished with the passage of rules curbing lucrative overdraft charges and lowering debit card swipe fees."

"They have got to make up the income some place," Vernon Hill II, the founder of Commerce Bank, told the Times. "I think we will see a lot more fees."

They've got to? Says who?

For example, the aforementioned $15 wire fee. That comes from TD Bank, a Canadian-based company. They simply have to make up for not being able to screw merchants, because... Well, that's not extremely clear.

In September of 2010, TD reported an increase of profit over the previous quarter of 29%. Of course, they were still recovering from the housing crash at the time. A year later, TD reported a profit increase of 23%, "allowing it to briefly supplant Royal Bank of Canada as Canada's largest company by market value."

Wow, times are tough, huh?

The idea that profits always have to be increasing is not just bad for consumers, it's also unsustainable. Banks are already starting to charge more and more for every little thing, nickel and diming customers at every turn, and they're still not making enough to satisfy themselves. When banks say they "have" to raise fees to make money, what they really mean is that they have to raise fees to make more money. They don't really "have" to -- not by a long shot.

Of course, all these new fees can't be "secret fees." Banks are required by law to disclose them beforehand. But banks use disclosure to make the fees as secret as possible, burying them under a pile of legalese. A Pew study found that checking account disclosures contain a median of 49 fees, hidden in a document "generally twice as long Romeo and Juliet." Overdraft fees, when you look at them like the short-term loans that they actually are, carry an annual interest of 5,000%.

And all to continue to see profits increase year after year. If you're still wondering why the 99% are angry at bankers and Wall Street, this is just one example. It's hard not to notice someone rooting around for spare change in your pocket. It's even harder to thank them for it.